Starting December 30th, 2005, the US Treasury Department
issued and confirmed the Roth 401k Rules for 401k retirement plan savers.
These Rules come into effect starting January 3rd, 2006 and we will
look indepth at some of these Roth 401k rules.

Required Minimum Distribution Rules Confirmed

Since Regular Roth IRAs are not subject to the
Minimum Required Distribution
Rules (MRDs), there was a lot of opposition when the same MRDs rules
were applied to Roth 401ks. The Final Roth 401k Rules have confirmed
that yes, Roth 401ks are subject to the minimum required distribution
(MRDs) rules.

401k Minimum Required Distributions (MRDs) are
established by the Internal Revenue Code to make sure that retirees
actually withdraw their money upon retirement (and use it for their
day to day expenses) as opposed to passing on this wealth to their heirs.
As soon as you reach the age of 70.5, you must start withdrawing money
starting April 1st of the following year (at 71.5) or April 1st of the
year following your official retirement...
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Roth 401k Contributions and Rollovers Only

The only type of contributions allowed to a Roth
401k include Roth 401k Deferral Contributions and certain types of rollovers
from other Roth 401k and Roth 403b accounts. Therefore, rollovers from
an IRA, 457 plan or other matching contributions are not permitted to
be made to a Roth 401k .

Non-Qualified Distributions (withdrawals made from
a Roth 401k before the owner meets the expected requirements) will be
taxed on a pro-rated basis meaning only the earnings made on the retirement
assets will be taxed. The amount of qualified distributions, non-qualified
distributions and the amount of pro-ration to be done can only be determined
by your 401k plan administrator. This is advantageous to the Roth 401k
owner because unlike holders of Roth IRA accounts, he does NOT have
to determine the amount of qualified distributions, the amount of taxes
to be paid and the pro-ration rules.

Firms Must Offer Traditional 401k to Offer Roth
401k

Your employer must offer a Traditional 401k plan
in order to be eligible to offer Roth 401k Retirement Plans to his/her
employees. This means the employer cannot offer Roth 401k as a sole
retirement plan of his company. Furthermore, Individual Taxpayers cannot
establish Roth 401k accounts, unlike the Roth IRAs that can be established
by individual taxpayers. This means only employers can offer Roth 401k
retirement plans to their employees.